State Bank of India Chairman Rajnish Kumar has slammed a private sector lender for the crisis at Altico Capital, as its unilateral move to secure its own money can potentially cause troubles to the wider financial system.
The realty-focussed non-banking lender Altico, which owes over ₹4,500 crore to the system (mostly banks), defaulted on a nearly ₹20 crore interest payment late last week on an external commercial borrowing (ECB) loan.
[On Saturday, Bloomberg-Quint reported that HDFC Bank Ltd had acted as a primary dealer for Altico Capital in an external commercial borrowing deal with UAE-headquartered Mashreqbank PSC.]
The default by Altico has resulted in concerns over the wider implications.
According to reports, a leading private sector bank allegedly moved in to secure its exposure by netting-off money from a fixed deposit maintained by Altico.
“You have taken care of the ₹50-100 crore (exposure), and felt happy for saving your money, but if you are damaging the system, then it is not proper,” Kumar said, without naming the private sector lender.
Altico owes ₹660 crore to the UAE-based Mashreq Bank, ₹400 crore to SBI, ₹200 crore to UTI MF and ₹150 crore to Reliance Nippon, per India Ratings estimates. Alticodefaulted on an interest payment of ₹19.97 crore to Mashreq Bank last week. On September 3, it was downgraded to junk status by rating agencies India Ratings and Care Ratings.
Altico is backed by marquee investors such as Clearwater Capital Partners, Abu Dhabi Investment Council and Varde Partners.
The default was on the troubled company’s ECB loan. It was reportedly not allowed by the Reserve Bank of India to be used for interest repayments, leading to the default. As per they central bank’s norms, ECBs by lenders can only be used for on-lending.
According to reports, the ECB money was kept with the private sector lender as a fixed deposit and it moved in swiftly to secure its loans on the news of its default.